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Íslandsbanki hf.: 1Q 2018 Consolidated unaudited interim financial statements

Íslandsbanki started the year with continued strong lending growth of 2.8%, a deposit increase of 1.4% and a 5.1% increase in its balance sheet to ISK 1,088bn from year-end 2017.

1Q18 financial highlights:

  • Profit after tax was ISK 2.1bn (1Q17: ISK 3.0bn) generating a 4.8% return on equity (1Q17: 7.0%).
  • Earnings from regular operations were ISK 2.9bn (1Q17: ISK 3.5bn) and return on equity from regular operations normalised for 15% CET1 was 8.2% (1Q17: 10.6%).
  • Net interest income amounted to ISK 7.7bn (1Q17: ISK 7.4bn), an increase of 4.6%. Net interest margin was 2.9% (1Q17: 2.9%).
  • Net fee and commission income was ISK 2.8bn (1Q17: ISK 3.3bn), down by 15% from the same time last year mostly due to lower activity levels from fee-generating subsidiaries.
  • Administrative costs excluding one-off costs totalled ISK 6.8bn, a 7.3% rise between years but when adjusted for inflation, the increase was 2.9%. This is mainly a result of lower capitalisation of IT consultant work, increased IT investment and increases in negotiated salary agreements. 
  • Loans to customers grew by 2.8% (ISK 21bn) to a total of ISK 776bn at the end of the quarter. Total new lending amounted to ISK 42bn which was split across various lending divisions while deposits from customers grew by 1.4% (ISK 8.2bn) to ISK 575bn at the end of the quarter.
  • The Bank´s liquidity and capital position continues to be strong and exceed all internal and external requirements. 

1Q18 operational highlights

  • In January, the Bank issued an innovative EUR 300m 6NC5 fixed rate senior unsecured bond at a spread of 75 basis points over 5-year mid swaps. This issue, the longest-dated and most tightly-priced benchmark bond from an Icelandic financial institution since 2008, is a significant achievement for the Bank.
  • In February, IS Funds, Íslandsbanki´s subsidiary, launched a development company, 105 Miðborg, which plans to build nearly 42,000 m2 of above-ground housing at Íslandsbanki´s old HQ location, Kirkjusandur.
  • ISK 13bn dividend payment was approved at the Bank´s Annual General Meeting in March. From 2013 the Bank has paid ISK 73bn in dividend to its shareholders.
  • New mortgage loans were 5% higher than during same period last year.
  • About 4,500 overdraft applications approved for over ISK 1.2bn via new automated online service.
  • The Bank announced its open banking strategy in order to develop new digital services for its customers.

Birna Einarsdóttir, Chief Executive Officer at Íslandsbanki:

Íslandsbanki started the year with continued strong lending growth of 2.8%, a deposit increase of 1.4% and a 5.1% increase in its balance sheet to ISK 1,088bn from year-end 2017. There was good growth in new mortgages which grew by 5% compared to first quarter last year. Fees and commissions were in line with expectations for the parent company whilst the group as a whole saw fees decline by 15%, from the same time last year, mostly due to lower activity levels from two of our fee-generating subsidiaries.

On the expense side, our administrative costs are still too high as the real change from first quarter last year was 2.9% and can be mostly explained by work related to our new core deposit and payment system and negotiated salary increases. Upon the completion of the core system later this year, and building on our recently revised organisational structure, last year´s completed move to our new HQs, continued streamlining and the most efficient branch network in Iceland, we are confident that we will soon be on the path to cost reduction.

Our international and domestic funding operations have done well recently. We issued two successful senior callable bonds in foreign public markets, a EUR 300m 6-year issue at 75 basis points (bp) over 5-year mid-swaps, and a SEK 1bn 4-year deal at 80 bp over 3-month STIBOR. The callable feature in both transactions is designed to improve funding efficiency in the years ahead, and demonstrates our willingness to embrace useful innovation. The Bank also continued to lead in the domestic market, and issued ISK 9.5bn of covered bonds during the quarter.

Most of our interactions with customers today are through digital channels and as part of our vision of being number 1 for service, we used our online platforms, the Íslandsbanki, Kass and Kreditkort apps, to launch several new digital solutions in the first quarter. In addition, we just announced a new initiative as a response to the EU's new payment directive (PSD2), where we are opening up the Bank for cooperation with certified third-party providers. With this, Íslandsbanki is taking an important step towards modernising its banking services, by reflecting customer digital preference and rapid market development.

Investor relations 

Investor call in English

Today, 9 May, the Bank will host an investor call in English to present the financial results at 13:00, Icelandic time. The call will start with a short macro update on the Icelandic economy, followed by a review of the financial results and Q&A. Please register by replying to: Dial-in details and presentation will be sent out prior to the call.

Additional investor material

All presentation material will subsequently be available and archived on the Bank´s investor relations website where other material is also available:
Financial calendar and silent periods
Information on Íslandsbanki's financial calendar and silent periods can be found on the IR website